COMMERCIAL LAW CONTRACTS 2026/2027: COMPREHENSIVE EXAMINATION WITH VERIFIED QUESTIONS AND CORRECT ANSWER RATIONALES

COMMERCIAL LAW CONTRACTS
2026/2027: COMPREHENSIVE
EXAMINATION WITH VERIFIED QUESTIONS
AND CORRECT ANSWER RATIONALES

INTRODUCTION

Welcome to this comprehensive examination in Commercial Law Contracts for the Academic

Year 2026/2027. This examination has been meticulously designed to test your knowledge,

analytical skills, and practical application of commercial contract law principles across the full

spectrum of topics essential for legal practice and academic progression



SECTION A: FORMATION OF CONTRACT

Question 1: Intention to Create Legal Relations

Question: What is the effect of including an "honour clause" in a written commercial
agreement?

A) It strengthens the presumption of legal enforceability
B) It has the effect of rebutting the normal presumption of an intention to create
legal relations
C) It renders the agreement void ab initio
D) It converts the agreement into a deed

Correct Answer: B

Rationale: An "honour clause" has the effect of rebutting the normal presumption of
an intention to create legal relations in a commercial agreement. Its effect is to
render the agreement binding in honour only so that it will not be a legally binding

,contract. In commercial contexts, there is generally a strong presumption that parties
intend to create legal relations, but an honour clause explicitly negates this intention,
making the agreement morally but not legally enforceable .




Question 2: Consideration and Past Consideration

Question: Mary promises to pay her assistant Ned $10,000 in consideration of the
services he provided over the years. Mary never pays Ned. Which of the following is
correct?

A) Mary is liable only if Ned still works for Mary
B) Mary is not liable, because the consideration was unintentional
C) Mary is not liable, because the consideration is in the past
D) Mary is liable for payment of the $10,000

Correct Answer: C

Rationale: For consideration to be valid, it must be given in exchange for the
promise. Past consideration—where the act was performed before the promise was
made—is generally not good consideration. Since Ned's services were provided over
the years before Mary's promise to pay $10,000, this constitutes past consideration,
and Mary is not liable. However, this could be enforceable if the past request carried
with it an implied promise to pay, as established in Pao On v Lau Yiu Long .




Question 3: Consideration Supporting a Unilateral Promise

Question: What is the consideration to support a unilateral promise?

A) A promise to perform an act in the future
B) Performance of the act requested

,C) Payment of monetary consideration
D) Execution of a deed

Correct Answer: B

Rationale: The consideration to support a unilateral promise is performance of the
act requested, as established in Carlill v Carbolic Smoke Ball Company. In a unilateral
contract, one party makes a promise in exchange for the other party's performance
of a specified act. The acceptance occurs through performance, and consideration is
the act itself, not a return promise .




Question 4: Past Consideration and the Previous Request Device

Question: Pao On v Lau Yiu Long is authority for two propositions relating to what
can constitute consideration. Which of the following is one of those propositions?

A) Past consideration is always invalid regardless of circumstances
B) The previous request device can avoid the past consideration rule if a previous
request carried with it an understanding or implied promise to pay
C) Past consideration can never be converted into valid consideration
D) Performance of an existing legal duty is never good consideration

Correct Answer: B

Rationale: Pao On v Lau Yiu Long establishes two key propositions: (1) the previous
request device can avoid the past consideration rule if a previous request carried with
it an understanding or implied promise to pay—the later express promise merely
fixes the amount; and (2) performance or promising to perform an existing
contractual duty owed to a third party can be good consideration. This demonstrates
that the courts can sometimes find consideration where the past act was requested
with an implied promise of payment .

, Question 5: Ward v Byham - Majority vs Denning LJ Approach

Question: What was the difference between the approach of the majority of the
Court of Appeal in Ward v Byham and the approach of Denning LJ in that case?

A) The majority found the contract void while Denning LJ found it enforceable
B) The majority sought to establish that the promisee had provided consideration by
going beyond her legal duty, whereas Denning LJ considered that the mere
performance of an existing legal duty should be good consideration if it was of
factual benefit to the promisor
C) The majority relied on promissory estoppel while Denning LJ relied on
consideration
D) Both approaches were identical

Correct Answer: B

Rationale: In Ward v Byham, the majority of the Court of Appeal sought to establish
that the promisee had provided consideration by going beyond her legal duty (by
ensuring the child was "well looked after and happy" rather than merely "kept").
Denning LJ took a more progressive approach, considering that the mere
performance of an existing legal duty should be good consideration if it was of
factual benefit to the promisor. This reflects the broader principle that factual benefit
can constitute sufficient consideration .




Question 6: Alteration Promises and Consideration

Question: Which of the following statements regarding alteration promises is TRUE
following Williams v Roffey?

A) Williams v Roffey is authority for the fact that an alteration promise is enforceable
if there is a factual benefit arising to the promisee
B) Williams v Roffey is authority for the fact that an alteration promise to pay more
money is enforceable if there is a factual benefit arising to the promisor from making